Joint Statement of Chairman Tenenbaum, Commissioner Adler and Commissioner Robinson on the Notice of Proposed Rulemaking Regarding Voluntary Recall Notices and Corrective Action Plans

The Chairman and Commissioners explaining their votes to publish the notice of proposed rulemaking regarding the voluntary recall notice and corrective action plans in the federal register.
November 15, 2013

Today, we voted to publish in the Federal Register a Notice of Proposed Rulemaking (NPR) regarding Voluntary Recall Notices and Corrective Action Plans (CAPs). We believe this rule will lead to better informed consumers, greater clarity for manufacturers, and more effective recalls.
Over the past five years, the Commission has successfully promulgated over forty regulations to implement the Consumer Product Safety Improvement Act of 2008 (CPSIA), including a final rule laying out the statutorily required components for public notices regarding mandatory recalls ordered by the Commission or by a U.S. District Court. Although the CPSIA did not require the agency to promulgate a rule outlining the requirements for voluntary recall notices, the need to adequately inform the public and prompt consumers to act remains the same whether we are conducting a mandatory or a voluntary recall.
Our current regulation regarding voluntary corrective action plans, 16 C.F.R. part 1115.20, includes the ability to publicize the terms of a CAP as a point of negotiation with a recalling firm, but it does not address the specifics, like form or content, that should be included in a voluntary recall notice. Using the elements listed in our mandatory recall notice rule as a template, this rule would provide recalling firms with additional guidance regarding the Commission’s expectations for voluntary recall notices. It would also update our current regulation on CAPs by providing the Commission with additional enforcement tools and increased flexibility when negotiating CAPs with firms.
Improving the Efficiency of Recall Notice Negotiations
Based upon our mandatory recall notice rule and decades of experience negotiating thousands of voluntary corrective actions and recall notices, the Commission staff has recommended a list of provisions they believe most voluntary recall notices should
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contain. For example, we have long asked recalling firms to include the word “recall” in the title of its recall press release or to use direct voluntary recall notices when a firm has consumers’ contact information. Interested parties have raised concerns regarding unnecessary delays when negotiating recall notices with the Commission. It is our hope to reduce or eliminate these delays by setting forth the Commission’s expectations regarding the elements it believes are needed to issue effective recall notices.
Additional Enforcement Tools
Making Voluntary CAPs Legally Binding. As 16 C.F.R. 1115.20(a) is currently written, voluntary CAPs are not legally binding. We added language to the staff’s draft NPR that, if adopted in the final rule, would change the legal status of voluntary CAPs. Currently, we spend considerable staff time and resources executing voluntary recall agreements that have no binding effect, not because the law prevents them from being binding, but because our own regulation ties our hands and prevents us from enforcing such agreements. It is unthinkable in the business world and in most of daily life, for that matter, to expend time and energy executing an agreement that is non-binding. Given the fact that these recalls involve the health and safety of the American consumer, we believe these agreements must be treated the same way as all of the other agreements into which we enter.
Adopting this change should not alter the way the Commission negotiates voluntary recalls or the types of remedies firms propose to address safety issues with their products. The need to repair or replace or refund with respect to a product that poses a safety risk remains the same irrespective of a voluntary CAP’s legal status. In addition, we understand that most firms already view a voluntary CAP as they would a legally binding document, which is probably why most firms use both outside and in-house counsel when negotiating a recall with the Commission.
Finally, we understand that most firms fulfill the terms of their CAPs in a timely manner. However, for the rare but persistent occasions when firms are dilatory or delinquent in implementing their CAPs, this change would enable the Commission to take steps to enforce existing CAPs rather than begin negotiations (or commence litigation) as though the parties had never reached an agreement.
Adding Compliance Program Agreement Provisions. The staff draft NPR proposed to add language to current 16 C.F.R. part 1115.20(a), which would include compliance program agreements as a point of negotiation with a recalling firm. We support this change because we believe under certain circumstances the addition of a compliance program to a CAP has the potential to prevent future product safety hazards. The Commission’s job is not only to consider the immediate safety issue from the product being recalled, but also to protect the public from future hazards. We added language, taken from the staff’s briefing package accompanying the NPR, to provide examples of the circumstances that may trigger the Commission to request a compliance program as well as the types of provisions the Commission may request in a compliance program. Most companies have compliance programs to help them identify or prevent safety issues
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and to assist them in fulfilling their reporting obligations. This provision is intended to address those companies that lack effective compliance programs and internal controls, while providing notice of the types of circumstances that might trigger the need for such a program.
Request for Comments
In the overwhelming majority of voluntary recall negotiations, we have found that the Commission and recalling firms have the same goals. Both parties want to effectively inform the public about safety issues and remove potentially dangerous products from consumers. We believe the provisions included in this NPR will help further these goals, and look forward to receiving comments from interested parties regarding these proposed changes.

 

Today, we voted to publish in the Federal Register a Notice of Proposed Rulemaking (NPR) regarding Voluntary Recall Notices and Corrective Action Plans (CAPs). We believe this rule will lead to better informed consumers, greater clarity for manufacturers, and more effective recalls.

 

Over the past five years, the Commission has successfully promulgated over forty regulations to implement the Consumer Product Safety Improvement Act of 2008 (CPSIA), including a final rule laying out the statutorily required components for public notices regarding mandatory recalls ordered by the Commission or by a U.S. District Court. Although the CPSIA did not require the agency to promulgate a rule outlining the requirements for voluntary recall notices, the need to adequately inform the public and prompt consumers to act remains the same whether we are conducting a mandatory or a voluntary recall.

 

Our current regulation regarding voluntary corrective action plans, 16 C.F.R. part 1115.20, includes the ability to publicize the terms of a CAP as a point of negotiation with a recalling firm, but it does not address the specifics, like form or content, that should be included in a voluntary recall notice. Using the elements listed in our mandatory recall notice rule as a template, this rule would provide recalling firms with additional guidance regarding the Commission’s expectations for voluntary recall notices. It would also update our current regulation on CAPs by providing the Commission with additional enforcement tools and increased flexibility when negotiating CAPs with firms.

 

Improving the Efficiency of Recall Notice Negotiations

 

Based upon our mandatory recall notice rule and decades of experience negotiating thousands of voluntary corrective actions and recall notices, the Commission staff has recommended a list of provisions they believe most voluntary recall notices should contain. For example, we have long asked recalling firms to include the word “recall” in the title of its recall press release or to use direct voluntary recall notices when a firm has consumers’ contact information. Interested parties have raised concerns regarding unnecessary delays when negotiating recall notices with the Commission. It is our hope to reduce or eliminate these delays by setting forth the Commission’s expectations regarding the elements it believes are needed to issue effective recall notices.

 

Additional Enforcement Tools

 

Making Voluntary CAPs Legally Binding. As 16 C.F.R. 1115.20(a) is currently written, voluntary CAPs are not legally binding. We added language to the staff’s draft NPR that, if adopted in the final rule, would change the legal status of voluntary CAPs. Currently, we spend considerable staff time and resources executing voluntary recall agreements that have no binding effect, not because the law prevents them from being binding, but because our own regulation ties our hands and prevents us from enforcing such agreements. It is unthinkable in the business world and in most of daily life, for that matter, to expend time and energy executing an agreement that is non-binding. Given the fact that these recalls involve the health and safety of the American consumer, we believe these agreements must be treated the same way as all of the other agreements into which we enter.

 

Adopting this change should not alter the way the Commission negotiates voluntary recalls or the types of remedies firms propose to address safety issues with their products. The need to repair or replace or refund with respect to a product that poses a safety risk remains the same irrespective of a voluntary CAP’s legal status. In addition, we understand that most firms already view a voluntary CAP as they would a legally binding document, which is probably why most firms use both outside and in-house counsel when negotiating a recall with the Commission.

 

Finally, we understand that most firms fulfill the terms of their CAPs in a timely manner. However, for the rare but persistent occasions when firms are dilatory or delinquent in implementing their CAPs, this change would enable the Commission to take steps to enforce existing CAPs rather than begin negotiations (or commence litigation) as though the parties had never reached an agreement.

 

Adding Compliance Program Agreement Provisions. The staff draft NPR proposed to add language to current 16 C.F.R. part 1115.20(a), which would include compliance program agreements as a point of negotiation with a recalling firm. We support this change because we believe under certain circumstances the addition of a compliance program to a CAP has the potential to prevent future product safety hazards. The Commission’s job is not only to consider the immediate safety issue from the product being recalled, but also to protect the public from future hazards. We added language, taken from the staff’s briefing package accompanying the NPR, to provide examples of the circumstances that may trigger the Commission to request a compliance program as well as the types of provisions the Commission may request in a compliance program. Most companies have compliance programs to help them identify or prevent safety issues and to assist them in fulfilling their reporting obligations. This provision is intended to address those companies that lack effective compliance programs and internal controls, while providing notice of the types of circumstances that might trigger the need for such a program.

 

Request for Comments

 

In the overwhelming majority of voluntary recall negotiations, we have found that the Commission and recalling firms have the same goals. Both parties want to effectively inform the public about safety issues and remove potentially dangerous products from consumers. We believe the provisions included in this NPR will help further these goals, and look forward to receiving comments from interested parties regarding these proposed changes.